The National Audit Office (NAO) report on the BDUK’s former Rural Broadband Programme, now renamed the Superfast Broadband Programme, contains elements that might lead to cognitive dissonance.

It reports that BDUK commissioned Atkins, a primary supplier of services to government, to look at BT’s costs to provide high speed broadband in rural areas. After looking at a few sites in Suffolk, Atkins concluded “BT had charged Suffolk nearly 20% less than would hypothetically be charged by another efficient supplier, in part reflecting that BT benefits from substantial national bulk buying power compared with other providers.” Paragraph 3.10)

That’s good news, right? But it seems there’s more joy to come for taxpayers. In Paragraph 5 NAO reports “BDUK’s experience of actual costs in phase 1 has led to BT agreeing to submit lower costs in its financial model for phase 2.”

However, it carefully notes that BT was picking low hanging fruit in Phase 1, namely peri-urban areas rather than deep rural ones where is cost to reach them is likely to be higher, unless you use a satellite.

NAO also suggests BT got other sums wrong. BrOkenTeleph0n3 revealed that BT’s planners estimated BT would break even on a 20% take-up in 12-14 years. “Take-up of superfast broadband so far has been significantly faster than forecast by BT in the phase 1 contracts. Take-up has risen to more than 20% already for two non framework projects”, the NAO found. This “should bring greater coverage than contracted, as local bodies will be able to extend their rollout with remaining funds,” it says.

BT is the only framework supplier left, and 43 out of 47 county councils have opted to use the framework to procure Phase 2, although 10 may elect to hold money back for Phase 3, the final 5%.

“Overall, the effect of the first 2 phases will be to reinforce BT’s already strong position in the wholesale market for broadband infrastructure (the Wholesale Local Access Market). BT’s assets and infrastructure will benefit from approximately £1.7 billion of public sector investment although BT must maintain these assets at its own expense. BT is also required by regulatory conditions to provide wholesale access to other suppliers.”

The NAO also revealed that the public will benefit from clawbacks due to higher than expected take-up for only seven years. “After these seven years, the supplier will keep all of the extra wholesale profit.”

BT amortises its fibre over five to 20 years, and its exchange equipment over three to 13 years.

BTW, in its 2013 rural broadband report on page 35, the NAO said “The Atkins ‘should cost’ model for Northamptonshire is three per cent higher than BT’s actual bid for the area. Atkins was not able to complete analysis of a second local body area, Suffolk, due to the difficulties it encountered in modelling a more complex technical solution. Atkins’ model is the only model available to us that has tried to match a corresponding BT bid identically.”

The hour-long Public Accounts Committee interview on the NAO report, featuring DCMS, BDUK and BT officials, took place on 28 January 2015. You can see the video here.

There are still some people who are interested in seeing what’s happening to the near £2bn of taxpayers’ money given to BT to roll out next generation broadband in the “Final Third”. Many of them probably sit on the Commons’ Public Accounts Committee, which is taking its third stab at finding if BT is delivering value for money this coming Wednesday.

The PAC, chaired by Margaret Hodge, was previously frustrated by the answers it received (here and here), and vowed to keep asking questions until it was satisfied. BT’s director of strategy, policy and portfolio, Sean Williams, who was the source of much of Ms Hodge’s frustration, gets a third act in front of the committee.

In its preamble the PAC said its reports on the rural broadband programme in September 2013 and April 2014 “raised concerns over lack of published information on BT’s plans for superfast broadband coverage, the availability and transparency of cost data and the level of competition secured throughout the programme. This recall session will examine the transparency of cost and rollout information and explore whether the department has done enough to promote greater competition for phases 2 and 3 of the programme.”

Some farmers who will be able to get their CAP forms in on time dug their own fibre in the B4RN area.

MPs have launched an inquiry into rural broadband speeds following on-going concerns that nearly £2bn of taxpayers’ money is unlikely to produce the expected results.

The Environment, Food and Rural Affairs Committee said the government aims to provide universal access to standard broadband with a speed of at least 2Mbps and to ensure superfast broadband is available to 95% of UK premises by 2017.

The government has budgeted some £780m for Broadband Delivery UK (BDUK) to cover the areas not covered by the commercial roll-outs by BT and Virgin Media. This sum has been added to by county officials, who also applied European funding, and BT, which won all the procurement tenders. The total is close to £2bn.

Some £20m was earmarked for “hard to reach” communities and individuals under the Rural Broadband Programme.

MPs noted that from January 2015 all applications for the new Common Agricultural Policy (CAP) schemes will have to be made online. The Rural Payments Agency has committed to providing “a range of additional support” for customers who can’t get online, don’t have access to a computer or don’t have the necessary skills to use one.

The inquiry will examine the current broadband coverage in rural areas and the new digital─only services. It will also look at the “Assisted Digital” support being offered.

The committee want written evidence on

the extent of broadband coverage in hardest to reach rural areas

digital access and experience of digital─only programmes, such as the new CAP system applications

There is less than a month left to respond to the government’s Digital Communications Infrastructure Strategy consultation.

The government seeks guidance on what people think will they require from a communications ecosystem that is fit for their purposes.

In preparing the consultation document it consulted “companies, organisations and individuals from across the communications industry, consumer representatives, the regulator, other government departments and the devolved administrations”.

A glance through Annex A shows that the consultation is, from the outset, framed by an insiders’ view of how the debate should go. “Our assumptions were developed through discussion with stakeholders and draw on a review of published reports and articles. The assumptions include:

Users will need more bandwidth as data consumption continues to rise;

Expectations to gain access to services and applications on the move will become the norm;

Technological advances in telecommunications and broadcasting will continue to be rapid;

We can expect changes in the communications market, potentially including new players and possibly market consolidation; and

Resilience and reliability will become increasingly important as aspects of what constitutes a good service, alongside availability and speed.”

Last year the Confederation of British Industries (not credited) said in a study of the UK’s broadband infrastructure that it was “a mistake to hold back the investment until after the next election” and that “households and firms in rural internet ‘not-spots’ need to be connected faster”.

The Federation of Small Businesses (credited) said earlier this year the networks are not “fit for purpose”. “Many urban or semi-urban businesses can experience poor coverage too, and even where broadband is available the range and quality of services often fall short of what businesses require.

“Tailored business packages offering symmetrical upload and download speeds are often prohibitively expensive, while business parks and premises have been overlooked in the roll-out of local fibre networks to residential areas. If the full potential of small business is to be harnessed and the economic benefits of broadband connectivity realised, this must change.”

In 2012 the Forum of Private Business (credited) said, “Energy costs and access to effective telecommunications, including broadband, are the most important infrastructure issues faced by small businesses.”

To be fair, HMRC recently acceded to FPB’s call to delay the compulsory online submission of VAT and tax returns until there is adequate access to high speed broadband across the country.

But that is a small victory.

The well-connected Philip Virgo shows that the scenarios envisaged DCMS are already out of date. By 2020, DCMS’s most extreme view is likely to be commonplace, at least in other countries. Describing the background material as “myopic”, Virgo says, “…publicity for the consultation has been muted and its timing might seem to imply HMG is going through the motions and in not serious. But the politicians are serious and the consequences of a lack of response other than from those contacted will be profound.” (His emphasis.)

As policy issues, those are a lot more useful than most of the 44 questions posed by the DCIS consultation (see Annex C for the summary.) Should government policy really consider technical issues like IPv6? Should it really care how UK network speeds compare to other countries?

A disciple of economist Michael Beesley, Virgo strongly believes that regulators can, or rather should, do little more than control price, quality of service and predatory behaviour. “The recent histories of Ofcom and Ofgem indicate why he was right,” he says.

The Rwandan telecoms regulator RURA has taken this to heart. Last year it set out easily understood and measured Quality of Service standards for mobile and fixed line operators. How the operators do it is up to them. Either they hit it or they don’t. At risk is their licence. That concentrates the mind.

But to return to the consultation. TechQT has put up the entire document plus annexes in an easily commentable online format, thanks to DigressIT. It will collect comments and forward them to DCMS by deadline. And it won’t “disappear” them the way inputs to the Digital Britain report have mysteriously vanished.

Comments close on 1 October. Have your say. It may be your last chance for 10 years.

Maps showing that the Welsh Assembly Government’s (WAG) publicly-funded Superfast Cymru project supplied by BT will overbuild an existing publicly-funded network have led to questions about the legality of the £425m next generation broadband project.

Using post code data obtained under the Freedom of Information Act with the help of the Information Commissioner’s Office, broadband consultant Richard Brown has identified post codes included in the Superfast Cymru roll-out that are already covered by the £30m Fibrespeed network. He has asked the European Commission to investigate whether there has been a breach of the regulations.

Where BT plans to roll out Superfast Cymru. Source: WAG

BrokenTelephone reported in November last year that the WAG was seeking ways to overbuild Fibrespeed. At the time business, science and transport minister Edwina Hart said a change in the guidelines governing state aid for broadband might allow the overbuild, and promised to report back to WAG members.

Fibrespeed is owned by the WAG but supplied and operated under a 15 year contract by independent dark fibre network operator Geo (sold last week to US-based Zayo). It was to service 14 business parks in north Wales with an optical fibre trunk network at prices equivalent to London and the UK South-East, according to assembly member Lesley Griffiths, speaking in 2008. Local ISPs tapped spare capacity in the network to provide local residents with wireless connections starting from 2Mbps, providing a service BT could not match.

Brown asked Hart a year ago if Superfast Cymru would overbuild Fibrespeed. “At that time I received a statement from the business minister that she was satisfied that there was no overbuild, and the EU Commission received a similar reassurance that there was no overbuild and so chose not to pursue the matter any further,” he wrote to the commission.

On receiving the post code data for Superfast Cymru coverage areas, he tested them against those covered by Fibrespeed (see table).

“The original statement issued to me by the business minister, and subsequently affirmed by the EU Commission, was that the Fibrespeed project was specifically targeted at business parks in the north of Wales and, whilst resellers of the Fibrespeed capacity may have extended this network using alternative connection methods (wireless appears to be prevalent), no business park was to be covered by Superfast Cymru, and so no overbuild of the original public funded project would take place,” he said.
“LL17 OLJ is St Asaph Business Park. It is where Fibrespeed have their principal office of operations.”

Brown said, “It is clear that a deliberate attempt appears to have been made to misrepresent both the Fibrespeed and Superfast Cymru projects to the EU Commission for the purposes of securing additional (duplicated in part) public funding.
“Whilst the declared outcome sought (increased access of citizens to superfast broadband speeds) is of course laudable, the Superfast Cymru project itself is under scrutiny as to whether it can indeed deliver on this.”

*released postcodes refer to a document which is the 54k (approx) postcodes that the Information Commissioner compelled the Welsh Government department to release to Brown that detail the target intervention areas of the Superfast Cymru project.

Vodafone has called on European regulators to ensure that non-incumbent-owned mobile network operators have access to fibre backhaul on the same terms and conditions as their in-house operators or face a declining competitive ecosystem.

The call stems from a looming shortfall in microwave capacity and prohibitive pricing of incumbents’ fibre, poles and ducts to cope with the fast-rising volume of data traffic.

Research by Analysys Mason commissioned by Vodafone found that incumbent operators favour their in-house mobile operators when it comes to accessto a fibre-based backhaul. “These inputs are not always made available to competing operators as a wholesale or retail product with the desired interface, quality, speed or price.

“The fact that the required inputs are not available, or are extremely expensive, may dampen competition in the mobile market in some countries because the fixed incumbent operator is usually (with the exception of the UK) also a major mobile operator and can gain benefits as a result of this vertical integration – specifically the much greater capillarity of its fibre network,” it said.

The leased line market, in which the mobile operators are a large segment, contributed £2bn/y to BT’s £18bn turnover, the researcher found.

Ben Wreschner, who leads Vodafone’s regulatory economics section, said all Vodafone wants is access on equal terms and conditions as the in-house mobile operator. He said Vodafone accepted that there couldn’t be a single price across Europe, if only because labour prices differ. Instead he called for a harmonised approach to access to fibre for mobile backhaul.

He called on the European Commission to provide guidance to BEREC, the European telecoms arch-regulator, for directives that national regulatory agencies (NRAs) can implement to give effect to this.

The study showed that independent mobile operators use microwave extensively to backhaul their traffic. But they are running out of spectrum. The shift to small cells for LTE traffic is quickly eating up the available capacity. Vodafone’s preliminary report for 2014 revealed that 4G smartphone users use about twice as much data as 3G users, mainly to stream video. Smartphone penetration in Vodafone’s European markets is around 45%. Both factors are pushing mobile operators toward fibre, which has the required capacity to ensure an acceptable user experience.

The MNOs’ options are to switch to so-called E-band microwave in the 60-90MHz band, which due to rapid attenuation of signals, will require many more sites to be rented; to rent access to commercial fibre where available; to rent regulated fibre from the incumbent operators, or to build their own fibre networks.

Vodafone has bought some of its own fibre backhaul (eg Cable& Wireless), but it has cost billions and doesn’t always cover the cities where demand is greatest. Building new fibre would duplicate existing fibre networks, take a long time, and cost a lot more on top of their expensive mobile licences.

Last week Ofcom said it would give BT a further period of non-regulation of fibre prices for high speed (above 1Gbps), where it holds an effective monopoly outside London. It also promised to rule soon on a TalkTalk complaint that BT operates an illegal margin squeeze on fibre prices.

Wreschner said he was watching the margin squeeze decision with interest, but stressed that that is a different market (retail) to Vodafone’s concern (wholesale) about backhaul. “We think the wholesale market needs specific regulation,” he said.

This is why, although they face similar problems as altnets trying to provide fibre to rural homes and businesses, the mobile industry did not speak out when the BDUK process was being set up, he said.

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